Courtesy of the Senate Democratic caucus
Sen. Martin Looney (Courtesy of the Senate Democratic caucus)

Lawmakers are struggling with the idea of allowing a private for-profit company to purchase nonprofit community hospitals in the state.

Tempers flared at the end of last year’s legislative session over a bill that would have made it easier for a private, for-profit hospital company to purchase physician practices from a nonprofit hospital that it planned to take over.

Gov. Dannel P. Malloy vetoed the bill saying that it needed further consideration “to determine whether current law provides adequate safeguards to guard against any perceived or actual threat to the independence of medical decisions made by providers employed by for-profit entities.”

It’s an area where the state has little experience. The only for-profit hospital in Connecticut is Sharon Hospital.

Lawmakers, Malloy, and union officials have been wary of unknowns when it comes to for-profit hospitals and what they mean for the residents of Connecticut. While the hospitals seeking to convert are desperate to bring new capital to their facilities in order to save the community institutions.

“We should not allow additional for-profit hospitals into our state until we have all of the information on, all of the various entities that are bidding to make profits on the healthcare needs of our citizens,” Sen. Majority Leader Martin Looney, D-New Haven, told the Public Health Committee Wednesday.

Looney was speaking in favor of a bill that would prohibit any nonprofit hospital from converting to a for-profit hospital after Oct. 1. If the bill passed, it’s likely the only hospital in a position to convert would be Waterbury Hospital.

Waterbury Hospital was the first to start courting for-profit suitors like Vanguard Health Systems, a Tennessee-based for-profit hospital operator that was recently acquired by another Texas-based for-profit company called Tenet HealthCare Corporation.

Tenet has been in negotiations with Waterbury Hospital and has been courted by Bristol Hospital, and Eastern Connecticut Health Network. Tenet also recently created a joint medical foundation with Yale New Haven Hospital.

Bill Aseltyne, senior vice president and general counsel for Yale New Haven Hospital, said the joint venture with Tenet was “innovative.”

“Tenet will bring capital necessary to support hospitals you’ve heard from this evening,” Aseltyne said. “The capital that’s not available from not-for-profits in this state, including from Yale New Haven-Hospital.”

Screengrab from CT-N
Trip Pilgrim of Tenet (Screengrab from CT-N)

Trip Pilgrim, senior vice president of development for Tenet Healthcare, said Tenet is one of the nation’s largest for-profit hospital groups with 77 hospitals and 200 outpatient centers.

“For many hospitals in this state and the nation the current nonprofit model is simply no longer viable,” Pilgrim said. “With state and federal funds being cut, and implementation of the Affordable Care Act the healthcare industry is drastically changing and hospitals need to adapt. The attractive solution for some hospitals is entering into innovation and strategic partnerships with for-profit institutions.”

Last year, Connecticut laid off 1,400 hospitals workers. He said that will continue to happen under the current nonprofit model. He said the goal of Tenet is to make sure its hospitals are staffed appropriately.

Lawmakers are worried that there would be less transparency about what was happening at these hospitals if they become for-profit entities because the tax code doesn’t force them to report certain expenses. The legislation, which is modeled after Rhode Island legislation, would require the hospital to report a laundry list of items from charitable contributions to estimates of uncompensated care going back five years.

Darlene Stromstad, president and CEO of Waterbury Hospital, said the information the bill is requesting already has to be produced through the “certificate of need” process the hospital goes through the the Office of Healthcare Access and the Attorney General’s office. In case the committee wanted proof, Stromstad brought along the more than 4,000 pages of documents the hospital submitted to the state. She said it’s also filed on the state website for anyone to view.

“For nearly a decade Waterbury Hospital has struggled financially,” Stromstad said. “The only year in the past decade we have a positive bottom line was fiscal year 2012 … unfortunately that stability was very short-lived and we ended 2013 with a loss of $2.3 million.”

She said her hospital doesn’t have a large endowment to absorb these kinds of losses and 70 percent of the patients are on Medicaid or Medicare.

“We keep chasing a reimbursement level that’s constantly decreasing,” Stromstad said.

She said without this conversion the hospital “will limp along until such time as we can’t.” She said the joint venture with Tenet will give the hospital the resources it needs to survive.

She said the legislation creates a process that “you can’t be sure at the end you can even get through.”

Rep. Prasad Srinivasan, R-Glastonbury, said his concern is there is already a process in place for these conversions and the legislation just adds an additional burden to make it impossible for these conversions to take place.

“I think the public is entitled to know who is coming into their community and essentially taking over their community hospital, as the statutes read now there’s not a whole lot of information. Not enough to make an intelligent decision,” Melodie Peters, president of AFT Connecticut, which represents the 700 nurses at ECHN, said.

She said she doesn’t want to put a “ball and chain” around the entities, especially if they’re coming in and negotiating in good faith as they have with ECHN and the unions there.

“But I also think the community deserves more information about the entity that’s coming in to buy that hospital,” Peters told lawmakers Wednesday.

Srinivasan said the requirements are so extensive that at the end of the day “we may not have the happy marriage we are hoping for and have disastrous results.”

But the issue may be moot if the legislature doesn’t allow these for-profit entities to employ physicians.

“I would be remiss if I did not point out that neither this bill nor any others currently pending before the legislature directly address the question of whether for-profit hospitals should be permitted to employ physicians and engage in the corporate practice of medicine,” Attorney General George Jepsen wrote in his testimony on the bill. “Some for-profit hospitals have indicated that they will not do business in this state at all if they cannot employ physicians, as nonprofit hospitals currently do, and thus vertically integrate through the acquisition of group medical practices.”

Jepsen pointed out that none of the bills before the legislature this year allow for the corporate practice of medicine.

Lori Pelletier, executive secretary-treasurer of the AFL-CIO, said Connecticut needs to be very careful about moving hospitals into the for-profit arena.

“I hear from my colleagues across the country where for-profit hospitals are making a run and the lives that they leave in their wake after they come in and raid the community,” Pelletier said. “We need to make sure that doesn’t happen in Connecticut.”